Marelli, owned by KKR, to file for debt reorganization in Japan
Marelli Holdings Co., a parts supplier owned by KKR & Co., will on Tuesday file for renegotiation of its debts with Mizuho Financial Group Inc. and other lenders via alternative dispute resolution in Japan, people briefed said. of the case.
The auto parts company, created in 2019 when KKR merged its Calsonic Kansei and Magneti Marelli units, will continue to operate while working with creditors on a reorganization, said the people, who asked not to be identified as the information are not public. The first meeting between the lenders is set for March 7, they said.
Marelli, a key supplier to automakers Nissan Motor Co. and Stellantis NV, had at least 1.1 trillion yen ($9.5 billion) in total debt as of September, according to people familiar with the finances. Marelli and Mizuho aim to provide specific details of the ADR-based reorganization in April and obtain approval from all lenders in May, they said. If they fail to agree on a restructuring plan, Marelli could face debt settlement litigation, which could force lenders to cancel all or part of their loans to the auto parts supplier.
Japan’s three megabanks, Mizuho, Sumitomo Mitsui Financial Group Inc. and Mitsubishi UFJ Financial Group Inc., raised their loan loss provisions for Marelli in the October-December quarter, the sources said.
The alternative debt resolution procedure in Japan allows a company in financial difficulty to renegotiate its debt with its creditors, while continuing to operate as if nothing had happened. During the ADR reorganization process, negotiations between a company and its creditors are facilitated by three independent mediators with legal and accounting expertise, who are selected by the Japan Association of Reorganization Professionals and appointed by the Ministry of ‘Economy.
as it strives to position itself as an automotive leader for the future, despite the current challenges facing the industry globally.
Nicola McGowan, spokesperson for Marelli, declined to comment.
KKR’s total investment in Marelli is around 200 billion yen, including the acquisition of Calsonic Kansei, Magneti Marelli and a capital raise last year, people familiar with the matter said. Separately, Mizuho Bank and the Development Bank of Japan each hold about 35 billion yen in preferred shares, they said.
The ADR reversal procedure provides that the shareholders waive their rights to the company concerned and that the corporate officer resigns, according to the directives published by the association.
Another key factor is Nissan, a former major shareholder of Calsonic Kansei, which can only promise future orders and provide financing if Marelli follows the turnaround ADR process.
Azusa Momose, Nissan spokesperson, said: “Marelli is an important partner for Nissan like other suppliers, and Nissan maintains appropriate levels of collaboration.” A representative for Stellantis did not respond to a request for comment.
Marelli’s sales plummeted last year as the coronavirus pandemic took hold, disrupting supply chains, chip supplies and auto manufacturing across the world. The company employs approximately 54,000 people and operates approximately 170 facilities worldwide to manufacture lighting, air conditioning, electric motors, suspension systems and other components for automakers around the world.
To prevent Marelli from running out of funds during the ADR process, Mizuho and other banks are lining up 100 billion yen in financial support, the people said. Mizuho will provide a 20 billion yen bridge loan, while also considering allowing Marelli to withdraw a 40 billion yen deposit it has with Mizuho and the Development Bank of Japan, they added. Repayment of principal and interest on Marelli’s loans of around 50 billion yen will be postponed, they said.
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